Many business owners may have been disappointed when they discovered we weren’t playing a cruel April fools joke on them last week.
When we wrote in one of our previous blogs that bills for businesses would be rising at the beginning of this financial year – unfortunately we meant every word.
Corporation tax and business rates are both rising, inflation still remains in double figures and the Bank of England raised interest rates again to counter them making borrowing even more expensive.
Relief for business owners and directors seems to be in short supply but there are some tactics that can be employed that can give them the most precious of commodities to deal with these increasing debts – and that’s time.
HMRC are the most prolific creditor in the UK with more businesses owing them than any other.
If your business owes money to HMRC through corporation tax, VAT or PAYE arrears then instead of worrying about what to do if you receive a payment demand – and if you don’t pay them you will – you can get yourself some extra weeks and months to repay the debt through a process known as a Time to Pay (TTP) arrangement.
What is a Time to Pay arrangement?
A Time to Pay (TTP) arrangement is a specific legal agreement that has to be arranged by a licensed insolvency practitioner and is between a business and HMRC.
Very briefly, it gives the company additional time to repay the outstanding amount and bring their affairs up to date.
A TTP will usually last over six months or less depending on the circumstances but they can be extended by up to 24 months.
While an agreement is active, business owners must make the regular agreed upon payments to ensure they are up to date with their arrears otherwise the agreement can be terminated by HMRC who will insist on full repayment.
Directors will still have to pay interest on any owed arrears but any penalties or surcharges to HMRC that would usually occur will be suspended and not applied.
Advantages and disadvantages of a TTP
Like with many agreements a TTP comes with its pros and cons:
- Payments can be made over a longer period of time supporting cash flow and allowing more accurate financial planning and forecasting
- TTP offers a breathing space for viable companies that are experiencing financial issues – time to rebuild profit margins and cash reserves
- Formal insolvency procedures are averted so the business can continue trading
- Legal action is prevented if HMRC were planning to bring a winding up petition or other remedies
- Any HMRC surcharges and penalties are avoided if the TTP is in place before a tax payment is due.
- Several HMRC debts can be included in the agreement including Corporation tax, VAT and PAYE
- All repayments need to met in full and on time
- Some high-risk industry sectors may be affected in its ability to obtain a TTP agreement
- Interest does not stop accruing and is still payable on outstanding monies
- If any repayments are missed or stopped then expect a swift and serious response from HMRC
- A TTP is a one-time offer. Failure to meet the terms or fulfil the obligation will not see any further relief granted
If you are worried about your bills rising and worried about not being able to keep up with them, then you could definitely benefit from some friendly guidance and advice.
We offer a free initial consultation for any director or business owner who wants to arrange one at a convenient time and date.
One of our expert advisors will work with you to better understand the situation your business is in and what options you could have available to improve your position.
They will let you know how you can implement them as quickly and efficiently as you can.
You might have a lot more choices than you think – but you will only find out if you get in touch first!